After the announcement of budget proposal for FY2023-24, middle class salaries and other earning individuals are busy calculating their tax saving options, which they can exercise to save beyond ₹7 lakh annual limit. However, these benefits would be applicable only under old income tax regime and those who want to claim these benefits need to choose old tax regime because from 1st April 2023, new income tax regime would be the by default tax regime for an earning individual.
1] NPS: In National Pension System (NPS) scheme, an earning individual is given an additional ₹50,000 tax deduction under Section 80CCD (1B). So, if an earning individual has exhausted its ₹1.50 lakh per annum investment limit, he or she can claim income tax rebate on one’s investment in NPS account under this section. In this section , one can claim tax exemption on up to ₹50,000 investment in one financial year.
2] Health insurance premium: A taxpayer may request a tax refund on the premiums they paid for health insurance during the assessment cycle under Section 80D of the Income Tax Act. In one fiscal year, the reimbursement ranges from $25,000 to $1 lakh. If a taxpayer is under the age of 60, they are eligible to claim a tax rebate on the first 25,000 euros of health insurance premiums paid. If a taxpayer is paying the parents’ health insurance premiums and they are under 60 years old, they are eligible for an additional tax credit of up to $25,000 on the cost of their parents’ health insurance.
In case of parents being senior citizens, then in that case this amount limit goes up to ₹50,000 per annum. However, in both cases both parents and child can’t claim tax rebate on same health insurance premium. However, if the taxpayer is a senior citizen, then in that case ₹25,000 annual limit goes up to ₹1 lakh. Hence, if a taxpayer is senior citizen and it is paying health insurance premium for its parents as well, then in that case the taxpayer would be able to claim tax rebate on up to ₹1 lakh ( ₹50,000 for himself and ₹50,000 for parents) under Section 80D.
3] Tax rebate on home loan: A tax payers who is paying home loan EMI, he or she can claim tax rebate on up to ₹2 lakh home loan interest paid in the assessment cycle. However, the home loan borrower should be living in the unit or the unit has to be self occupied.
4] Interest on savings account deposits: A depositor with a savings account may use Section 80TTA to claim TDS exemption on up to 10,000 in interest earned in a single fiscal year. All bank savings accounts are subject to this amount. Therefore, the taxpayer is encouraged to calculate the total savings account interest of all bank accounts if someone has multiple savings accounts. According to Section 80TTB, the non-taxable threshold for older citizens is $50,000.’
5] Donations to charitable institutions: Under Section 80CCC, if a taxpayer has paid donation to an approved charitable institution, then in that case one can claim tax exemption under Section 80CCC. However, in case of donation in cash, the limit is capped at ₹2,000. So, in case of donation exceeding ₹2,000, one should pay via bank cheque. But, only paying through cheque won’t work as you need stamped receipt of donation by the trust with mention of its address, PAN card with name of the trust written on it.
